Canadian Rail Shutdown Update: Trains Moving But Likely Weeks to Recover
Canadian trains are moving again. Within days of the simultaneous lockout and union strike notice taking effect, Canada’s railway stoppage ended. Canada’s federal government forced arbitration, which the union challenged but failed to prevent. Ari Ashe reports in the Journal of Commerce (JOC):
Engineers and conductors for Canada’s two freight railroads returned to work Monday after the Teamsters Canada Rail Conference (TCRC) unsuccessfully challenged Labour Minister Steven MacKinnon’s invoking of binding arbitration to resolve the contract dispute that caused a 17-hour lockout last late week.
The TCRC asked the Canada Industrial Relations Board (CIRB) to reject MacKinnon’s referral, but the board ruled Saturday that it didn’t have the authority to do so and ordered the more than 9,000 workers from Canadian National Railway (CN) and Canadian Pacific Kansas City (CPKC) back to their jobs.
The TCRC is not done fighting the forced arbitration, as the union says it’s appealing the decision to uphold the forced arbitration and send union rail workers back to work. Ashe’s article continues:
TCRC President Paul Boucher said the union will file an appeal in federal court to challenge the legality of MacKinnon’s referral, but will abide by the CIRB directive.
The first hearing for binding arbitration to resolve the ongoing labor dispute is Aug. 29. No strikes or lockouts will be permitted during binding arbitration and the terms of the prior collective bargaining agreement remain in effect until a new deal is hammered out.
The union sees the decision of forced arbitration that doesn’t allow strikes as union breaking from the federal government. The decision also stops railways from conducting lockouts. However, the union thinks it works in the railways’ and big companies’ favor. They need only hold a quick but economically damaging lockout to get the government to step in and break unions with forced arbitration and taking away unions’ legal ability to strike.
The TCRC does have a point. The rail companies have been asking the federal government for binding arbitration for a while. However, Prime Minister Justin Trudeau rejected their pleas. With a lockout that disrupted supply chains all through the country and many in the U.S., it only took a matter of hours for the government to step in. I’ll let you judge the good and bad of that.
I would guess that wherever shippers land on the issues and situation, they would hope the TCRC loses its appeal. If the union wins, there could potentially be another shutdown with either a strike or a lockout.
Recovery Will Likely Take Weeks
Even though the shutdown can be measured in days, even hours, the recovery likely will be measurable in weeks.
The lowest estimate I’ve seen in shipping news outlets is a week when talking about how long recovery will take for railroads after the short shutdown. And to be fair, even the couple times I say someone write “a week” the person either said “a week or more” or “at least a week.” Many are simply estimating weeks for the railroads to recover from all the effects of the shutdown.
In a rail stoppage post-mortem in FreightWaves by Stuart Chirls, he wrote:
It’s expected to take several weeks for the supply chain to catch up as idled shipments begin moving again.
It was actually Chirls, in another FreightWaves article only a day earlier, who’d said:
It could take the two largest Canadian railroads a week or more to recover from the effects of a shutdown that briefly stalled billions in freight including transborder trade with the United States.
Perhaps with a little more time to ruminate on it or getting more information had him go from “a week or more” to “several weeks” for the recovery. However, that first article was focused more on the recovery than the second, so here’s some of what he shared there:
… CN and CPKC had embargoed shipments for more than a week leading up to the lockout deadline. That had interrupted supply chains to a number of customers, some of whom had cut production shifts, according to published reports. Intermodal container flows into and out of ports were halted, where some terminals were already struggling to manage a surge of import traffic during the peak trans-Pacific shipping season.
Rail-served trade between Canada and the U.S. was $9.1 billion in June, approximately 14% of all trade between the two countries, according to the Bureau of Transportation Statistics.
“From our experience with previous rail strikes in Canada, we expect it to take up to a week for each railroad to be fully reset and running smoothly again,” said Scott Shannon, vice president, Canada, for C.H. Robinson. “It will take much longer to catch up with shipments that have gotten backlogged.”
…
Shippers dependent on rail to move containerized intermodal shipments were watching the western Canadian gateways of Vancouver and Prince Rupert in British Columbia. Logistics services providers said they were working with customers to avoid potential snarls, with disruptions from recent longshore labor disputes fresh in mind.
Prior to the shutdown, ITS Logistics was “working with shippers to check all of their import ocean container shipments that arrive at U.S. rail ramps to ensure that they do not have Canadian rail legs,” said Paul Brashier, vice president of global supply chain for ITS Logistics.
Brashier said the longshore strike at western Canadian ports in 2023 affected an estimated $800 million of cargo each day. ITS has been warning of port disruptions for months in its Port/Rail Index, and Brashier said it was the top concern in 2024. Two-thirds of Port of Vancouver cargo, including 90% of international exports, rely on rail, according to the Vancouver Fraser Port Authority.
“With CN and CPKC rail service resuming at the Port of Vancouver this week, our focus is now on implementing a recovery plan in coordination with industry partners including shipping lines, rail companies and marine terminals,” the VFPA said in a statement. “This includes anchorage prioritization to balance the needs of business sectors and commodities as we work to restore full port operations and fluidity.” The port added it is closely monitoring operations to support time-sensitive cargo movements and ensure equitable distribution of anchorages and other shared resources.
While the harvest of western Canada wheat — a major export — is underway, executives on both sides of the border were waiting on further developments.
“While we are encouraged by the order to resume operations and proceed to arbitration, it is still too early for our members, the U.S. (and Canadian) agriculture and forest products exporters, to celebrate,” said Peter Friedmann, executive director of the Agriculture Transportation Coalition, based in Washington. “Some labor sectors are contesting the Canadian government’s arbitration order, and anyone who has followed relations between transportation labor and management, knows not to take anything for granted. This goes for all freight modes, including those upon which agriculture depends – rail, truck, marine terminals. This week we will continue our Agriculture Transportation Coalition briefings, to assure a realistic understanding of if, when and how this matter will be finally resolved.”
2 Major U.S. Railways Reach Early Contracts with Unions
Stuart Chirls, who must be FreightWaves’ guy when it comes to rail news, reported on Friday that Norfolk Southern and BNSF reached deals with unions months early:
Norfolk Southern and BNSF late Friday said they had, in partnership, reached tentative, five-year collective bargaining agreements with a number of their unions.
The railroad pacts come four months before the opening of the next bargaining round and cover approximately 30% of the unionized NS (NASDAQ: NSC) workforce and 15% of BNSF workers.
Clearly, the railroads didn’t want to end up with a situation resulting in shutdowns, like what happened in Canada last week. Nor do they want another situation that nearly culminated in massive rail strikes in the U.S. in 2022.
This little update of good contract news means less drama and disruption threats shippers would need to keep an eye on later. But don’t worry, there’s plenty disruption threat to keep an eye on anyway. For example, Thursday’s post will likely be an ILA Strike Watch update.
